Aggreko: revenue down 8% at Olympic power firm

Glasgow-based Aggreko, the world’s largest temporary power firm, said on Tuesday its revenue was down 8% for the nine months ended September 30, 2019 — but that its full year earnings outlook is in line with market expectations.

Aggreko shares edged 2.5% higher to 817p to give the firm a current stock market value of just over £2 billion.

On July 30, Aggreko said its revenue slipped 10% to £768 million in the six months to June 30.

In a third-quarter trading update on Tuesday, Aggreko said: “Underlying group revenue (excluding the impact of currency and pass-through fuel) for the nine months ended 30 September was down 2% on last year, with reported revenue down 8%.

“Excluding revenue from the Winter Olympics in 2018 and early design revenue for the Tokyo 2020 Olympics this year, underlying group revenue was in line with the prior year …

“Performance across rental solutions remains mixed.  

“In North America, our largest region, underlying revenue was up 4%, reflecting good growth in most of our key sectors. 

“Despite softening in the region since the half year, revenue was up 12% excluding the impact of hurricane related work in 2018.

“Elsewhere, we continue to see the trends referenced at the half year; growth in Continental Europe has been offset by a weaker performance in Northern Europe, while in Australia Pacific good growth in the mining sector has been offset by a 100 MW emergency utility sector contract positively impacting the prior year results …

“Our power solutions industrial business has strengthened against the prior year through the last quarter, with underlying revenue now in line with 2018. 

“Excluding both the 2018 Winter Olympics in the prior year and the early design revenue for the Tokyo 2020 Olympics this year, revenue was up 7%, compared to 4% at the half year.  

“Across the regions, Latin America, Middle East and Africa are performing well, with our Eurasia business stabilising following the slowdown we reported in the first half …”

In its outlook, Aggreko said: “Our full year earnings outlook is in line with market expectations and we remain on track to deliver mid-teens ROCE in 2020. “

Analysts at Peel Hunt wrote: “No major surprises in divisional revenue commentary, but little specific insight to margin or utilisation trends.

“Investors likely to focus on comments that within Rental Solutions (55% FY19E EBITA), the US is seeing some ‘softening’.

“No specific details provided on net debt, capex or bad debt provisions – we assume in line.

“Management reiterates that AGK is on track to deliver ‘mid-teens’ ROCE 2020 (with the benefit of the Tokyo Games).

“We maintain our Dec 19 PBT of £197.2m (cons: £197m) to give EPS of 49.7p but see some downward pressure building on FY20 EPS.

“Shares trading on 16.0x Dec 19 (EV/IC of 1.4x) looking fully valued given the returns profile, competitive and structural pressures.

“We remain cautious.”